The Indiana Supreme Court recently reversed prior appellate decisions and held that there is no “rule of reasonableness” imposed on actions regarding closed installment contracts, such as promissory notes and mortgages, and that the limitations period is six years and begins running either at a missed payment, acceleration, or the note’s maturity date. See Blair v. EMC Mortg., LLC, 2020 WL 762592 (Ind. Feb. 17, 2020). Defendants executed a note and mortgage in 1992. They defaulted in 1995, and the note matured on January 1, 2008. Plaintiff brought this action in 2012, and defendants argued that it was untimely. The trial court found that plaintiff was entitled to foreclose, but that it was barred from seeking any payments or interest that accrued before 2006 due to the six-year statute of limitations. On appeal, the Court of Appeals reversed and found plaintiff waited “an unreasonable amount of time” after the 1995 default to bring this action, and therefore was completely barred from bringing it.
On appeal, the Supreme Court reversed. The Court found that there are two statutes of limitation for bringing an action on a note and mortgage, and that they “recognize three events triggering the accrual of a cause of action for payment upon a promissory note containing an optional acceleration clause.” The resulting limitations periods are: (i) six years from a missed payment to bring an action on the missed payment; (ii) six years from when the lender exercises its option to accelerate the debt to bring an action on the full amount; and (iii) six years from the maturity date to bring an action on the full amount. In doing so, the Court rejected the finding of Court of Appeals, as well as a number of other Court of Appeals cases, in which the courts imposed a “reasonableness limitation” on bringing an action when the creditor declines to accelerate the debt. The Court found that those decisions failed to distinguish between actions arising out of credit card debts—in which there is no maturity date and in which a reasonableness limitation may apply—and actions arising out of promissory notes and mortgages with a fixed maturity date. The Court held that there is no need for a rule of reasonableness for the latter category and, therefore, that this action was timely. Finally, the Court noted that the lender could have been entitled to the full amount due (and not just the amounts accrued in the six years before it commenced the action), but that the lender did not appeal that portion of the trial court’s decision.